Higher food item prices push the inflation up
Inflation increased to 9% in September from August’s 8.2%, according to information shared by the Pakistan Bureau of Statistics (PBS).
The PBS calculates the inflation rate by measuring the prices of a basket of 480 common goods and services, such as the cost of education, house rent, utility bills and food and beverages. An increase in the inflation rate means the prices of goods and services have increased.
Higher food item prices such as tomatoes, wheat and potatoes pushed the inflation up during September this year, said senior research analyst Karim Punjani.
“The rural inflation has been higher in September as compared to urban. It is because the rural inflation depends more on food items,” Punjani said.
The rural inflation increased by 11.1% as compared to urban inflation of 7.7%.
He added that the inflation during the month was more due to supply than demand. Inflation generally increases due to demand. But the monsoon damaged crops and also disrupted logistics, which pushed the prices up for essential goods. Moreover, wheat and sugar prices also went up.
Increasing policy or interest rates is the most important tool for a country’s central bank to leash inflation. Higher interest rates help curtail spending by people and companies. It in turn reduces demand, which tends to bring down prices.
However, Punjani thinks the State Bank will not have the luxury to increase interest rates to keep inflation in check.
“There’s growth [in the economy] but it has not happened across the board. Some sectors have shown growth but not all. The State Bank may not think of increasing interest rates any time soon unless the economy shows sustainable growth,” he said.
The International Monetary Fund (IMF) programme for Pakistan, which has been temporary dismantled till December this year after the country went into lockdown due to the coronavirus pandemic earlier this year, may resume from January.
Punjani says the resumption in the programme may cause energy prices to swell, which also increase inflation.